In October 2023, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) published Advisory Opinion 23-07 and approved a plan by a multi-specialty physician practice to pay its employed physicians bonuses related to net profits derived from outpatient procedures performed in practice-owned ambulatory surgery centers (ASCs). Each OIG Advisory Opinion is heavily reliant upon the facts provided by the requesting party, and AO 23-07 appears to be a treat – and not trick – because of the unique facts in this proposal.
What You Need to Know:
- In a fact-specific HHS OIG Advisory Opinion, a bonus plan for physicians based upon ASC referrals was approved
- HHS OIG relied upon the facts presented and a statutory exception and regulatory safe harbor
- Physician bonuses need to be structured in a compliant manner
This multi-specialty medical practice has 11 employed physicians. The medical practice also owns two ASCs as divisions and not as subsidiaries or affiliates. The medical practice provides services reimbursed by Federal Health care programs. The medical practice requested to pay each employed physician who performs procedures at either of the two practice-owned ASCs a quarterly bonus equal to 30% of the net profits generated by the facility fees that are directly attributed to that physician’s procedures performed in an ASC for the measured quarter.
In issuing its ‘favorable’ opinion, the OIG relied upon two factors: a statutory exception with respect to a bona fide employment relationship and the regulatory safe harbor which provides that ‘remuneration’ for purposes of the Federal anti-kickback statute does not include, “any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.”
There are several important take-aways from AO 23-07. First, OIG noted that a “similar arrangement involving bonus payments to independent contractor physicians or other non-employees under a different corporate structure (in which, for example, the physicians were owners of the ASCs and paid themselves the bonuses contemplated by the [proposal] as ownership distributions) may raise fraud and abuse concerns under the Federal anti-kickback statute” (emphasis added by the authors). Second, the OIG noted that the requesting party certified that the proposed arrangement would not implicate the federal physician self-referral law (i.e., the so-called Stark Law). This certification is a bit unusual given the types of procedures typically provided in an ASC. The OIG noted in AO 23-07 that if the proposed arrangement did, in fact, implicate the Stark Law, the OIG would not be in a position to issue any advisory opinion.
The OIG notes in each advisory opinion that the published opinion is only applicable to the requesting party and the facts provided to OIG. Bonus structures for physicians are fraught with potential risk. The OIG’s analysis and conclusion in AO 23-07 should be carefully reviewed so parties are not ‘tricked’ into thinking the OIG has provided an unexpected ‘treat’ to potentially similarly suited parties.
